Independent trustees work for members' best interest despite master trust conflicts of interest, says independent trustee company Pitman Trustees Limited (PTL).

The remark was made in response to concerns raised by the Pensions Regulator (TPR), which is currently scrutinising potential conflicts of interest in master trusts that occur because the trustee is appointed and paid by the provider who set up the scheme.

Darran Burton, TPR practice manager, said at the National Association of Pension Funds conference in Liverpool last month: "It is very hard to understand how and when they are acting as agents of the provider and when they are acting in the best interests of the member.

"We have even seen some arrangements where, in our view, the scheme rules prevent the trustees from acting in the best interests of members because their powers are fettered and they can't change the administrator or the investment manager because it is a tied arrangement with the provider."

However, Richard Butcher, PTL's managing director, said this situation is no different from most single employer trusts and that, although this can create a conflict of interest, the situation is not unmanageable.

Butcher said: "In all cases it is quite clear that we, the trustees, are acting for members. That said, we will always try to help the sponsor to succeed by using our skills and experience to better their offering.

"If an arrangement restrains the trustees' ability to act, this is not a conflict of interest. It only means we don't have the power to act. While this may be problematic for the regulator, the issue lies with the sponsor and not the trustees."

Butcher added: "If we have an issue with the work being done by the sponsor we would address it as and when. You don't go from being happy to unhappy with the sponsor in one jump. If issues are dealt with as the need arises there would never be the need to "fire" the sponsor.

"If, however, that did happen our only course would be resignation and that would do huge reputational damage to the pension scheme being sold by the sponsor. There is, therefore, a huge incentive not to let things go wrong."

Earlier this month, the Master Trust Association was launched to help improve the standards of practice within master trusts.

First published 20.11.2012
monique_simpson@wilmington.co.uk